Part I
The common interest doctrine can sometimes protect from the otherwise harsh privilege waiver impact normally triggered by the sharing of privileged communications among separately represented clients. Courts take widely varying views of this unpredictable doctrine, and about half of common interest doctrine assertions fail. Most courts require that each common interest participant has a lawyer. Some courts go beyond that.
In Ali v. Worldwide Language Resources, LLC, Nos. 5:20-CV-00638-D & -00644-D, 2022 U.S. Dist. LEXIS 201861, at *4-5 (E.D.N.C. Nov. 4, 2022), the court bluntly recognized that the common interest doctrine "serves as a narrow exception to the waiver rule only — it does not create a new privilege out of thin air." The court then recognized a demanding requirement that not all courts impose: "[t]he presence of counsel is key — several federal courts have held that statements made among co-parties absent an attorney do not qualify for the common interest rule’s protection at all." Id. at *5-6. Just a few weeks later, the Southern District of New York took a broader view of the doctrine. In Smith v. Pergola 36 LLC, No. 1:22-cv-4082 (LJL), 2022 U.S. Dist. LEXIS 229914, at *22 (S.D.N.Y. Dec. 21, 2022), the court held "an attorney need not be present for the communications" for the common interest doctrine to apply.
Stark disagreements like this can cause problems for lawyers who do not know where some adversary will challenge their common interest agreement's effectiveness — it may be in some far-off court that takes a narrower view than the jurisdiction where the participants drafted and signed their common interest agreement. Part II will address a frightening scenario in which participants may lose more than their privilege protection — they may lose their lawyer.
Part II
Part I described two courts taking the opposite position on whether the common interest doctrine could protect from waiver otherwise privileged communications among common interest agreement participants without a lawyer's involvement. A more dramatic risk might deprive one or more of the participants of their lawyer's services in a later dispute among them.
In Kragel v. Virgin Islands Water & Power Authority (WAPA), a wrongful termination plaintiff moved to disqualify WAPA's defense counsel. Civ. No. 2021-78, 2022 U.S. Dist. LEXIS 230474 (D.V.I. Dec. 22, 2022), magistrate judge's decision approved, 2023 U.S. Dist. LEXIS 10053 (D.V.I. Jan. 19, 2023) (Sánchez, C.J.). He argued that he had shared confidential information with that lawyer pursuant to a joint defense agreement (JDA) in an earlier case against WAPA and him as co-defendants (in which he had represented himself). He noted that WAPA's lawyer could use that confidential information against him in the current case to gain an "unfair tactical advantage." 2022 U.S. Dist. LEXIS 230474, at *13. Notably, the court acknowledged that "a lawyer who receives confidential information from a nonclient pursuant to a JDA may owe a duty of confidentiality to the nonclient [arising] from the lawyer's fiduciary or contractual obligation to the nonclient party, rather than an ethical duty." Id. at *19. But the court ultimately rejected plaintiff's disqualification motion, concluding that "vague allegations as to the types of information disclosed [in the earlier case] and how it might be used to his detriment are insufficient" to disqualify WAPA's lawyer. Id. at *28 (footnotes omitted).
No court requires a written common interest agreement. But wise lawyers recognize the wisdom of such an agreement — and include a prospective consent provision to avoid (or at least minimize) this disqualification risk. Ironically, this means that perhaps the most important provision in such a JDA does not focus on current commonality — but rather on future adversity.
Published March 13, 2023.
